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SECURITIES AND EXCHANGE COMMISSION
17 CFR PART 230
RELEASE NO. 33-7132
INTERNATIONAL SERIES RELEASE NO. 780
FILE NO. S7-36-94
RIN 3235-AG26
ADOPTION OF AMENDMENTS TO CLARIFY SAFE HARBORS FOR
BROKER-DEALER
RESEARCH REPORTS
AGENCY: Securities and Exchange Commission
ACTION: Final Rules
SUMMARY: The Commission is announcing the adoption of amendments
relating to the safe harbor provisions of Rules 138 and 139 under
the Securities Act of 1933. The amendments clarify the
availability of the safe harbor provisions of Rule 138 relating
to broker-dealer research reports on individual domestic and
foreign companies and the availability of the safe harbor
provisions of Rule 139 for broker-dealer industry research
reports which include sizable, first-time foreign registrants.
EFFECTIVE DATE: [Insert date of publication in the FEDERAL
REGISTER].
FOR FURTHER INFORMATION CONTACT: Annemarie Tierney, (202) 942-
2990, Office of International Corporate Finance, Division of
Corporation Finance, U.S. Securities and Exchange Commission, 450
Fifth Street N.W., Washington, D.C. 20549.
SUPPLEMENTARY INFORMATION: As described in detail below, the
Commission is adopting amendments to Rule 138 -[1]- and Rule 139
-[2]-
under the Securities Act of 1933 (the "Securities Act") -[3]-.
The amendments adopted today were proposed by the Commission on
December 13, 1994. -[4]-
I. AVAILABILITY OF RESEARCH REPORT SAFE HARBORS
Rule 138 under the Securities Act permits publication of
information, opinions and recommendations concerning qualifying
issuers by broker-dealers that are participants in a
distribution, so long as the reports contain information,
opinions or recommendations regarding a specified class of the
issuer's securities which is not the subject of the offering in
which the broker-dealer is a participant. The amendments adopted
today clarify that Rule 138 is available for offerings registered
on Form S-3. The amendments also clarify that Form F-3 eligible
issuers qualify for the rule, as do sizable first-time foreign
-[1]- 17 CFR 230.138.
-[2]- 17 CFR 230.139.
-[3]- 15 U.S.C. 77a et seq.
-[4]- See Release No. 33-7120 (Dec. 13, 1994), 59 FR 31038.
One comment letter, which expressed support for the
proposal, was received. That letter is available for
public inspection and copying in File Number S7-36-94
at the Commission's Public Reference Room in
Washington, D.C.
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issuers that meet the alternative offshore trading history test
adopted for Rule 139.
In addition, in light of the fact that shelf registration
statements often register both debt and equity securities (on an
either allocated or unallocated basis), the Commission is
amending Rule 138 to add an instruction codifying the staff
interpretation that the rule should be applied on an offering-
by-offering basis for issuers which are eligible to use Forms S-
3 or F-3 and are using the Commission's shelf registration
procedures. Thus, the filing of a shelf registration statement
covering different classes of securities does not impede the
availability of the rule.
Rule 139 under the Securities Act provides safe harbor
protection from the registration requirements of that Act for the
distribution by broker-dealers of information, opinions or
recommendations concerning issuers in the process of registering
securities under the Securities Act. The amendments adopted
today make clear that the expanded eligibility requirements
adopted last year -[5]- for sizable foreign issuers that satisfy
the alternative offshore trading history test in Rule 139 are
also available for those issuers' initial public offerings in the
United States.
II. COST-BENEFIT ANALYSIS
No information was provided in response to the Commission's
request regarding the costs and benefits of the amendments being
adopted today. The Commission believes that the adoption of
these amendments will benefit both issuers and broker-dealers
without imposing any additional costs.
III. STATUTORY BASES
The Commission's rules are being amended pursuant to
sections 6, 7, 8, 10 and 19(a) of the Securities Act of 1933, as
amended.
IV. EFFECTIVE DATE
The final amendments to the Commission's rules shall be
effective immediately upon publication in the FEDERAL REGISTER,
in accordance with the Administrative Procedure Act, which allows
effectiveness in less than 30 days after publication for, inter
alia, "a substantive rule which grants or recognizes an exemption
or relieves a restriction." 5 U.S.C. 553(d)(1).
List of Subjects in 17 CFR Part 230
Reporting and recordkeeping requirements, securities
TEXT OF PROPOSED AMENDMENTS
In accordance with the foregoing, Title 17, chapter II of
the Code of Federal Regulations is amended as follows:
PART 230 - GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
1. The general authority citation for Part 230 continues
to read in part as follows:
AUTHORITY: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss,
78c, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-29, 80a-
30, and 80a-37, unless otherwise noted.
* * * * *
-[5]- Release No. 33-7053 (Apr. 19, 1994), 59 FR 21644.
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2. By revising 230.138 to read as follows:
230.138 Definition of "offer for sale" and "offer to sell" in
sections 2(10) and 5(c) in relation to certain
publications
(a) Where a registrant which meets the requirements of
paragraph (c)(1), (c)(2) or (c)(3) of this section proposes to
file, has filed or has an effective registration statement under
the Act relating solely to a nonconvertible debt security or to a
nonconvertible, nonparticipating preferred stock, publication or
distribution in the regular course of its business by a broker or
dealer of information, opinions or recommendations relating
solely to common stock or to debt or preferred stock convertible
into common stock of such registrant shall not be deemed to
constitute an offer for sale or offer to sell the security to
which such registration statement relates for purposes of
sections 2(10) and 5(c) of the Act (15 U.S.C. 77a et seq.) even
though such broker or dealer is or will be a participant in the
distribution of the security to which such registration statement
relates.
(b) Where a registrant which meets the requirements of
paragraph (c)(1), (c)(2) or (c)(3) of this section proposes to
file, has filed or has an effective registration statement under
the Act relating solely to common stock or to debt or preferred
stock convertible into common stock, the publication or
distribution in the regular course of its business by a broker or
dealer of information, opinions or recommendations relating
solely to a nonconvertible debt security, or to a nonconvertible
nonparticipating preferred stock shall not be deemed to
constitute an offer for sale or offer to sell the security to
which such registration statement relates for purposes of
sections 2(10) and 5(c) of the Act (15 U.S.C. 77a et seq.),
even though such broker or dealer is or will be a participant in
the distribution of the security to which such registration
statement relates.
(c)(1) The registrant meets all of the conditions for the
use of Form S-2 [ 239.12 of this chapter] or Form F-2 [ 239.32 of
this chapter];
(2) The registrant meets the registrant requirements of Form
S-3 [ 239.13 of this chapter] or Form F-3 [ 239.33 of this
chapter]; or
(3) The registrant is a foreign private issuer which meets
all the registrant requirements of Form F-3 [ 239.33 of this
chapter], other than the reporting history provisions of
paragraph A.1. and A.2.(a) of General Instruction I of such form,
and meets the minimum float or investment grade securities
provisions of either paragraph B.1. or B.2. of General
Instruction I. of such form and the registrant's securities have
been traded for a period of at least 12 months on a designated
offshore securities market, as defined in 230.902(a).
Instruction to Rule 138
When a registration statement relates to securities which
are being registered for an offering to be made on a continuous
or delayed basis pursuant to Rule 415(a)(1)(x) under the Act
( 230.415(a)(1)(x)) and the securities which are being
registered include classes of securities which are specified in
both paragraph (a) and (b) of this section on either an allocated
or unallocated basis, a broker or dealer may nonetheless rely on:
(1) paragraph (a) of this section when the offering in which
such broker or dealer is or will be a participant relates
solely to classes of securities specified in paragraph (a)
of this section, and
(2) paragraph (b) of this section when the offering in which
such broker or dealer is or will be a participant relates
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solely to classes of securities specified in paragraph (b)
of this section.
3. By revising the introductory text to 230.139 and
paragraph (a)(2) to read as follows:
230.139 Definition of "offer for sale" and "offer to
sell" in sections 2(10) and 5(c) in relation to certain
publications
Where a registrant which is required to file reports
pursuant to section 13 or 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.) or which is a foreign private
issuer meeting the conditions of paragraph (a)(2) of this section
proposes to file, has filed or has an effective registration
statement under the Securities Act of 1933 (15 U.S.C. 77a et
seq.) relating to its securities, the publication or distribution
by a broker or dealer of information, an opinion or a
recommendation with respect to the registrant or any class of its
securities shall not be deemed to constitute an offer for sale or
offer to sell the securities registered or proposed to be
registered for purposes of sections 2(10) and 5(c) of the Act (15
U.S.C. 77a et seq.), even though such broker or dealer is or
will be a participant in the distribution of such securities, if
the conditions of paragraph (a) or (b) of this section have been
met:
(a)(1) * * *
(2) The registrant is a foreign private issuer that meets
all the registrant requirements of Form F-3 ( 239.33 of this
chapter), other than the reporting history provisions of
paragraphs A.1. and A.2.(a) of General Instruction I of such
form, and meets the minimum float or investment grade securities
provisions of either paragraph B.1. or B.2. of General
Instruction I of such form, and the registrant's securities have
been traded for a period of at least 12 months on a designated
offshore securities market, as defined in 230.902(a), and such
information, opinion or recommendation is contained in a
publication which is distributed with reasonable regularity in
the normal course of business.
* * * * *
By the Commission.
Jonathan G. Katz
Secretary
Dated: February 1, 1995